Social Media Engagement Correlates with Purchases

A concrete method for measuring return on investment for social media remains elusive, but recent research initiatives may be bringing such an answer
within range. In one recent study scheduled to appear in a journal titled Information Systems Research, researchers from the University at Buffalo School of Management, Aalto University and Texas
A&M University were able to correlate social media engagement with increased purchases for a large specialty firm in the northeast U.S.

According to co-author Ram Bezawada, assistant professor of marketing in the School of Management at the University at Buffalo,
“Our results show that when customers engage with a business through social media they contribute about 5.6 percent more to the firm’s bottom line than customers who do not.”

As for techniques, Bezawada echoed some of the basic advice often heard by social media
marketers: “When building communities, businesses should craft personalized messages, encourage member contribution, integrate knowledge about customers from both online and offline
interactions, and create specialized sub-communities for customers looking for premium and unique products.”

What’s not clear is just how, exactly, social media engagement drives sales (if the relationship is indeed causal): is engagement correlated with increased
“brick and mortar” sales? Because based on IBM’s most recent Black Friday report, it would appear that social media’s contribution to e-commerce activity is still pretty small.
According to IBM, Facebook was responsible for just 0.68% of traffic referred to leading e-commerce sites this past holiday shopping season. Looking at all e-commerce, the dominant social media
players (Facebook, Twitter, LinkedIn, and YouTube) together were responsible for just 0.34% of all online e-commerce referrals.

Social is far more broad than the IBM research references. The measurement was done at end points (FB, Twitter) that they could capture. The report didn't capture the vast activity/links/referrals that happen daily via social. And that lead to purchase and loyalty.

As customer touchpoints multiply, it's more difficult to connect the dots directly between any one message and a transaction. The relationship will also vary depending on the kind of transaction and sales cycle - e.g. how much research is involved beforehand, how often is the product purchased, etc. - and how engaged the user actually is with the social media presence of the brand. It sounds like the Buffalo study took a more holistic approach, correlating a 5.6% increase with a social media relationship, not drawing a causal relationship with a specific post, which is the right way to approach this. However, it isn't clear whether they addressed the question of causality. They say that there is a correlation, but users who engage on social media may be those more likely to purchase anyway. That doesn't prove that the social media relationship influenced purchases.

Good points Chet, but remember it is all in the interpretation of the data, and what you are looking to prove. Sometimes there is a need to apply old fashioned common sense, something often quite lacking in the marketing space, and make a simple determination that people prefer to buy from others, whether people or organizations, they like.